Naira official rate rises to N1,394/$1 amid FX market optimism

The Naira strengthened to N1,394 per US dollar in Nigeria’s official foreign exchange market on Wednesday, marking its strongest performance since May 2024.

The data, obtained from the Central Bank of Nigeria (CBN) website tracking the Nigerian Foreign Exchange Market (NFEM), signals a temporary easing of pressure on the local currency after weeks of volatility.

The naira closed at N1,394/$1, up from N1,409.50/$1 recorded on Tuesday, reflecting notable gains at the official window and suggesting short-term stability. This level brings the currency close to the last peak seen on May 29, 2024, when it traded at N1,329.65/$1.

While the official market shows signs of improvement, the parallel market continues to diverge, trading at N1,490/$1 on Wednesday, slightly firmer than Tuesday’s N1,491/$1.

This has widened the gap between official and parallel rates to N96, highlighting ongoing distortions and unmet foreign exchange demand outside official channels.

Analysts say that demand pressures and speculative positioning continue to weigh more heavily on the informal market.

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The recent gains in the official market are linked to improved liquidity conditions and CBN reforms aimed at stabilising the naira.

Market observers also point to a weaker US dollar as a supporting factor. In recent weeks, the dollar has retreated to its lowest levels since early 2022, partly due to investor reassessment of the US economic outlook.

US President Donald Trump dismissed concerns over the dollar’s decline, stating in a press conference in Iowa, “No. I think it’s great. I think the value of the dollar was great.”

Despite such comments, investor uncertainty around US trade policies continues to influence global currency movements, providing some relief to emerging market currencies like the naira.

Data indicates that official-market stability is improving, yet broader confidence across Nigeria’s foreign exchange ecosystem remains uneven, particularly given the persistent divergence with the parallel market.

Last week, the naira had closed mid-week trading at N1,423/$1 in the official market, illustrating the recent volatility before Wednesday’s gains.

Market participants remain cautiously optimistic, viewing the N1,394/$1 rate as a potential sign that near-term support measures are working, even as longer-term structural challenges in Nigeria’s FX system persist.